Nearly two years after the financial meltdown that spurred the Great Recession, we’re starved for news that the real estate market is recovering. And although there are some hopeful signs, are we really on the comeback trail? We took our concerns to Sage Hospitality’s Walter Isenberg who, along with partner Zack Neumeyer, owns more than 50 commercial properties in 24 states, such as the quaint, old-school Oxford Hotel and the ultrahip Curtis Hotel. Isenberg chatted with 5280 about what the commercial market is forecasting, the stimulus, and why there may still be trouble ahead.

Q: Last fall, you said 2010 could bring another economic downturn fueled by commercial real estate fragility. Halfway through this year, how does everything look?
The commercial market here is actually holding up better than most people thought it would. Last year, we thought banks were going to be more aggressive about enforcing provisions in loan documents. In fact, they’ve been more flexible than anticipated in working with borrowers, and as a result values have held up, so we’ve bought some time.

5280 August 2010
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Q: Does that mean the worst is over?
We’ve seen stabilization and may be starting to see an upturn, but we certainly don’t believe we’re out of the woods yet. There’s still a real possibility that we could see a second downturn. A lot of the stimulus money has had a positive impact on the economy, and there’s some pent-up demand because between the end of 2008 and early 2010 most businesses retreated and had a bunker mentality.

Q: How does Colorado compare to the other markets you’re in?
One good sign for [local] commercial real estate, though not necessarily for construction jobs, is that there’s no new development occurring, which is good because it will constrain supply and allow demand to catch up. The Front Range has fared better than a lot of other areas in the country because we’ve got a fairly diverse economy, we were ahead of the rest of the country on alternative energy—a sector that’s actually growing jobs—and we didn’t overbuild.

Q: What kinds of things can the commercial sector tell us about the overall economy?
Indicators such as companies’ inventories, storage and shipping costs, or vacant office or retail space can tell you where companies have let people go or are not filling jobs. But the economy is cyclical. Part of what’s happening is just the psyche of people. They’re pretty battered today. If we woke up a year and a half from now and were still seeing growth, that would be very positive.